Reduce Public Assistance Fraud in Texas The Texas Department of Human Services should explore all means of detecting and reducing public assistance fraud and investigate all fraud referrals that are potentially productive. Background The Office of the Inspector General (OIG) at the Texas Department of Human Services (DHS) investigates suspected fraud by applicants or recipients in the Aid to Families with Dependent Children (AFDC), food stamp and Medicaid programs. DHS established the fraud prevention investigation program to assist caseworkers in determining client eligibility for AFDC, food stamps or Medicaid. Referrals made by caseworkers are based upon pre-established criteria following attempts to verify and document unresolved eligibility factors. Because an application for public assistance must be processed within a specified time period, OIG allows five days for the completion of each fraud investigation for AFDC and the food stamp program, although it has a variable timeframe for the investigation of Medicaid fraud. Depending upon the results of an investigation, the appropriate action (approval, approval with reduced benefits or denial) concerning benefits is the responsibility of the caseworker. A post-fraud investigation program examines suspected fraud by recipients of AFDC, food stamps or Medicaid. Referrals may come from members of the public, but most come directly from DHS caseworkers. The criteria used by OIG for accepting a post-fraud referral include threshold amounts-the estimated over-issuance must be at least $1,500-and the OIG workload. If an OIG investigator discovers fraud in an amount above the threshold for felony prosecution, OIG refers the case to the appropriate county or district attorney. OIG may refer cases that are not prosecuted to an administrative disqualification hearing if the client has been documented as having committed fraud previously or to the DHS Recovery Unit for recovery of the overpayment. Although a previous analysis of OIG by TPR recommended referral tracking, OIG does not keep statistics on the number of referrals received, accepted or rejected for either the fraud prevention program or the post-fraud program. OIG has an automated case management system but does not use it for the collection, entry or use of referral statistics. Many states use telephone hotlines to help catch public assistance cheaters. California's welfare fraud hotline helped stop over $17.8 million in fraudulent overpayments during the last five years.1 The "California We-Tip" hotline is operated by a non-profit organization. It pays rewards of up to $100 to citizens who report suspected welfare fraud in cases which are successfully prosecuted. South Dakota started a welfare fraud hotline in July 1992 considered successful largely due to the extensive publicity. The state held press conferences, distributed posters and sent notices to those receiving public assistance checks. This program has allowed South Dakota to catch fraud that might not otherwise have been caught by routine computer matching. Other states with welfare fraud hotlines include Louisiana, Minnesota, Massachusetts, Kentucky and New Jersey. New York has a computer matching program with neighboring states to check for concurrent enrollment in public assistance programs. The interstate data exchange identified over 4,200 welfare recipients who have been receiving medical, housing, food and rent assistance from New York and at least one other state.2 The program also found abuse by those receiving general assistance, Medicaid, food stamps and AFDC.3 For example, a data exchange with New Jersey revealed that over 2 percent of New Jersey's 35,000 general assistance recipients received benefits from both New Jersey and New York. Of New York's 672,000 Medicaid beneficiaries, 437 received benefits from both states as did 400 of the state's 129,000 AFDC recipients.4 In Massachusetts, officials disclosed that nearly 700 inmates in state prisons and county jails were collecting welfare and had to be removed from the rolls. Another 770 inmates were referred to federal authorities when investigators found they may have been illegally receiving federal Supplemental Social Security or Medicaid payments.5 To verify eligibility, DHS regional offices in Austin, Beaumont and San Antonio have begun investigating ownership of automobiles by public assistance recipients in some cases. They use the Texas Department of Transportation database to assist their investigations. Several other states also verify public assistance information through motor vehicle registration databases. The Texas database, however, can be searched only by vehicle identification or license plate numbers. When public assistance recipients claim they do not own automobiles, it is impossible for DHS to search for information by name of owner. Recommendations A. The Texas Department of Human Services (DHS) should evaluate the costs and benefits of the self-imposed, five- day time limit allowed by its Office of the Inspector General (OIG) for the investigation of fraud prevention referrals. Federal and state regulations require caseworker processing of eligibility determinations to be completed within a specified time-30 to 45 days, depending upon the program-from the date of application. OIG established its self-imposed investigation deadline of five days so fraud prevention investigations would not delay public assistance application processing. Because of the five-day limitation, OIG rejects or returns as many as 50 percent of the fraud prevention referrals received from DHS caseworkers. OIG investigators and supervisors have the authority to decide which cases to accept or reject based upon their judgment regarding the potential costs and benefits of a given case. Rejection of referrals, although intended to avoid delaying the application process, may allow erroneous or fraudulent cases to be approved for benefits. B. DHS should consider lowering the criteria for OIG acceptance of post-fraud referrals and require all DHS offices to apply the same threshold amount. C. OIG should compile and disseminate accurate statistics on fraud prevention and post-fraud referrals received, accepted or rejected on its existing case management system. Because data regarding the number of referrals received, accepted or rejected is not compiled or reported, it is difficult to determine if referrals are increasing at a higher rate than the current OIG or prosecutorial staffs can handle. Some DHS regional offices have begun maintaining their own statistics on the number of referrals made and rejected. D. As a deterrent to public assistance fraud, DHS should publicize successful fraud prosecutions more aggressively. E. DHS should establish and promote a toll-free hotline for reporting public assistance fraud. F. DHS should establish an interstate data sharing agreement with its agency counterparts in Arkansas, Louisiana, New Mexico and Oklahoma to guard against recipients being enrolled in public assistance programs in both Texas and another state at the same time. Shared data would consist of computer tapes containing basic information of welfare recipients name, Social Security number, address and age. G. DHS should establish a computerized matching system with the Texas Department of Criminal Justice (TDCJ) to prevent incarcerated individuals from illegally receiving public assistance benefits. While this recommendation seeks to prevent inmates from illegally receiving benefits, another TPR recommendation in this report encourages appropriate TDCJ facilities to collect benefits for eligible inmates to help defray operating costs. H. The Legislature should require the Texas Department of Transportation (TxDOT) to provide a dedicated line into its motor vehicle database for use by other state agencies. DHS would use the database to verify automobile information used as a criteria for eligibility for Aid to Families with Dependent Children and food stamps. Implications While amending the OIG five-day time limit for processing fraud prevention referrals could reduce the amount of state funds lost through public assistance fraud, it could increase the need for additional OIG investigators. Modifying the current dollar threshold for OIG acceptance of post-fraud referrals would allow the investigation of a greater number of referrals, but it could create a heavier workload for OIG investigators. Publicizing successful fraud prosecutions and establishing a public assistance fraud hotline would also increase the number of post-fraud referrals. Allowing dedicated access to the TxDOT database would decrease fraud investigators' response time, allowing them to perform their jobs more efficiently. TxDOT would have to amend its motor vehicle registration reporting requirements to include the Social Security numbers of vehicle owners. Fiscal Impact While the recommendations to reduce public assistance fraud should save money, the total fiscal impact of this issue cannot be determined. Based on savings in other states, Texas could recover from $1 million to $10 million through the efforts described above, which should be sufficient to offset possible additional costs. One of the main costs incurred in implementing these recommendations would come from the hiring of new state employees; DHS would need additional fraud investigators to handle a workload that presumably would increase. A fraud hotline would cost about $50,000 per year, including the long distance charges for toll-free hotline calls, one investigator to answer calls and a voice response unit. DHS would need to advertise the hotline through such means as mail inserts, posters and free press efforts. According to TxDOT, reprogramming the motor vehicle database to allow searches by name would range from $50,000 to $250,000. DHS offices would need a computer terminal to provide access to the database, but each region could pool its data searches through a central site. 1 Los Angeles County Board of Supervisors - Fifth District, March 31, 1993, p. 1. (Press Release.) 2 Interview with Bob Tangeler, Audit Division, New York State Department of Social Services, Albany, New York, September 20, 1994. 3 Bruce Mohl and Doris Sue Wong, "NY Finds 548 Listed on Mass. Welfare; Computer Crackdown Sets Off Wider Probe," Boston Globe, August 3, 1994, p. 17. 4 "NY Finds 548 Listed on Mass. Welfare" 5 Don Aucoin, "Inmates are Found on Welfare," Boston Globe, September 24, 1994. -- END --